VAT in Dubai
From 2018, businesses must start collecting VAT in Dubai UAE. VAT is a form of tax on the consumption or use of goods and services levied at each point of sale.
VAT is a form of indirect tax and is used in more than 180 countries around the world. The end consumer ultimately bears the cost. According to the laws of VAT in Dubai UAE, Businesses collect and account for the tax on behalf of the government.
Mechanism of VAT in Dubai
“Most food staples have a price elasticity of demand ranging from 0.20 to 0.80 in demand. This means that staple food items are generally price inelastic. So when you regularly purchase an item for AED 20 and now see it priced at AED 21, it is unlikely that consumers will think twice about buying it, especially considering that the bulk of food items in the UAE is imported and prices fluctuate regularly,” says Dr. Sanjay Modak, Visiting Professor of Economics at the Rochester Institute of Technology. He says it is important to go the European way and include the VAT in the price you see on the shelves and not add it at checkout as it’s done in the US.
Rates of VAT in UAE
A VAT rate of 5% for food is still low compared to other countries. In Europe, rates range from 15% in Luxembourg to 25% in Croatia. Japan has a consumption tax of 5% and Singapore has a GST of 7%. Canada has 5%. Hong Kong still remains tax-free for all consumption.
Under the new system, residents and tourists buying gold jewelry will have to pay a 5 percent tax on the whole piece rather than on the making charges. This means a buyer will have to shell out AED 50 more while purchasing AED 1,000 worth of jewelry,
Meanwhile, the World Gold Council released a report which says jewelry sales in the country dropped 10 percent during the third quarter to seven tons. But sales generally pick up in the last quarter as tourist arrivals increase, so it’s early to ring the alarm bells.
Director General of the Federal Tax Authority, on Wednesday, said tourists would get refunds on their purchases at the airport while returning to their countries. He said the authority is working with the parties involved and is expected to roll out the plan before January 2018.
Parents will need to shell out more for school uniforms for their kids but school fees will be exempt from the tax. Higher education institutes that are more than 50 percent funded by the government, will not be charged VAT; the rest will come into the fold.
Education services will be exempt if run by a recognized institution and offers a recognized curriculum.
“In the case of higher education institutions, it should either be owned by the federal or local government, or receive more than 50 per cent of its annual funding directly from the Federal or local government,” he said.
“We expect that tuition fees, study material (books), medical fees, registration fees, admission fees and exam fees will be 0 per cent,” he said.
VAT in UAE
If the Annual Turnover of the company is more than AED 375,000/, it is mandatory for the business to get registered under VAT UAE before the end of the year 2017.
If the Annual Turnover is between AED 187,500 & AED 375,000/, it is optional for the business to get registered under VAT UAE. Further, if it is less than AED 187,500/, the business does not need to register under this law of VAT in the UAE. For more information, Contact us.
SAB Auditing of Accounts is equipped with a team of thriving VAT specialists who can help your business to overcome expected roadblocks such as lack of familiarity with VAT rules & regulations, structure and compliance issues, lack of resources, and lack of a compliant accounting system. SAB is offering the best VAT services in Dubai.